Cuban’s Mavericks Clobber Perot on Appeal

DALLAS (CN) – Outspoken Dallas Mavericks owner Mark Cuban is not mismanaging the basketball club into insolvency, a Texas appeals court ruled. Ross Perot Jr.’s company, Hillwood Investment Properties III Ltd., made the claim in a 2010 complaint against the basketball club and holding company Radical Mavericks Management LLC. An owner of a minority stake in the club, Hillwood claimed the Mavericks were hobbled by more than $200 million in debts, which it blamed on a “litany of questionable business, financial, and personnel decisions” by Cuban, who allegedly propped up the club himself. Perot bought a majority interest in the team in 1996 from founding owner Don Carter, then sold the majority interest to Cuban in 2000. “[The team] currently does not have revenues sufficient to pay its operating costs, and without additional borrowings, [the team] will not be able to fund its projected operating losses or to pay its obligations as they become due,” Hillwood’s complaint alleged. In a June 2011 motion to toss the suit, the Mavericks attached as their only evidence a large photograph of Mavericks player Dirk Nowitzki lifting the Larry O’Brien Championship Trophy after the team’s victory in that year’s NBA Finals. The abrupt filing went viral soon after. “Under Hillwood’s ownership, the team was deemed ‘the worst franchise’ in all of professional sports,” the motion said. “Under Cuban’s stewardship the Mavericks have become one of the league’s most successful teams and are now NBA champions. Accordingly, there can be no genuine question that Hillwood’s claims of mismanagement lack merit and Hillwood’s claims should be disposed of in summary judgment.” Dallas County Judge Craig Smith sided with Cuban, dismissing the lawsuit four months later. A three-judge panel with the 5th District Court of Appeals in Dallas refused to reinstate the lawsuit Thursday. Hillwood failed to show that Smith should have appointed a receiver for the team and, the court found, noting that judicial intervention was not necessary as long as Cuban was current on the team’s bills. “Hillwood cites no authority, and we have found none, to support an interpretation of ‘insolvency’ that would involve disregarding a historical and ongoing pattern of continuing financial contributions from third parties,” Justice David Bridges wrote for the court. “Further, even assuming the test for the inability to pay debts as they come due is a ‘forward-looking test,’ the test remains whether the entity is insolvent or in imminent danger of insolvency. While the test for insolvency may ‘look forward,’ it may only look forward to determine whether insolvency is ‘imminent.'” The court also disagreed that the trial court abused its discretion in sealing certain documents it found contained “serious and substantial interests” that “clearly outweighed” the public interest in keeping them open. “The sealed documents contain financial projections, confidential financial information generated by the NBA, and current and past financial statements,” Bridges wrote. “The trial court had before it affidavits showing the confidential nature of the financial information contained in the sealed documents and the fact that collective bargaining negotiations were ongoing at the time.” Cuban’s attorney, Tom Melsheimer with Fish Richardson in Dallas, said he is “extremely pleased” with the 5th Court’s ruling. “The Dallas Mavericks are one of the most successful franchises in the league, and Mark Cuban is a key part of that success,” Melsheimer said Friday. “Mr. Perot’s claims that this team was mismanaged are ludicrous.”